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If you acquire a new home before you dispose of your old one, both dwellings are treated as your main residence for up to 6 months if:

the old dwelling was your main residence for a continuous period of at least 3 months in the 12 months before you disposed of it

you did not use it to produce assessable income in any part of that 12 months when it was not your main residence

the new dwelling becomes your main residence.

If you dispose of the old dwelling within 6 months of acquiring the new one, both dwellings are exempt for the whole period between when you acquire the new one and dispose of the old one.

If you disposed of your old home before 1 July 1998, both homes are exempt for a maximum of 3 months.

Example

Exemption for both homes

Jill and Norman bought their new home under a contract that was settled on 1 January 2002 and moved in immediately. They sold their old home under a contract that was settled on 15 April 2002. Both the old and new homes are treated as their main residence for the period 1 January to 15 April even though they did not live in the old home during that period.

If it takes longer than 6 months to dispose of your old home, both homes are exempt only for the last 6 months before you dispose of the old one. You obtain only a part exemption when a CGT event happens in relation to your old home.

Example

Part exemption for a first home

Jeneen and John bought their first home under a contract that was settled on 1 January 1996 and moved in immediately. It was their main residence until they bought their 2nd home under a contract that was entered into on 2 November 2000 and settled on 1 January 2001.

They retained the first home after moving into the new one but did not use it to produce income. They sold the first home under a contract that was settled on 30 September 2001. They owned this home for a total period of 2100 days.

Both homes are treated as their main residence for the period 31 March 2001 to 30 September 2001, the last 6 months that Jeneen and John owned their first home. Therefore, their first home is treated as their main residence only for the period before they moved into their new home and during the last 6 months before its sale.

The 89 days from 1 January 2001 to 30 March 2001, when it was not their main residence, are taken into account in calculating the proportion of their capital gain that is taxable (89/2100).

Because they entered into the contract to acquire their old home before 11.45 am on 21 September 1999 and entered into the contract to sell it after that time, and held it for at least 12 months, Jeneen and John can use either the indexation or the discount method to calculate their capital gain.

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